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Supporting Guidance: Part 2 - Affordability and Funding

2 Affordability and Funding

2.1 Improvements in pay and conditions are to be funded from within existing budgets, without the redirection of programme funding.

2.2 If the total cost of a proposed agreement is not affordable within an agency's existing budget, the Ministers must not approve the agreement.

2.1 Improvements in pay and conditions are to be funded from within existing budgets, without the redirection of programme funding

2.1.1 The Australian community expects to receive value for money in terms of efficient and effective public policy and public services, delivered at a reasonable cost. The cost of remuneration and other employee benefits represents a significant expenditure for Australian Government agencies. As employee costs are taxpayer funded, it is the Australian Government's expectation that agencies manage these costs carefully from within existing budget allocations, and do not make commitments which are unaffordable or out of line with community standards and expectations.

2.1.2 An agency must not make offers or agree to proposals unless relevant approvals have been obtained, and the Agency Head is satisfied that the proposals are affordable.

2.1.3 Improvements to pay and conditions must be funded from within existing agency budget allocations for the life of an enterprise agreement or other workplace arrangement. Agencies are to only offer proposals that are affordable taking into account factors such as any approved funding increases including annual indexation, the application of all efficiency dividends, known future costs and the long term impact of increases to superannuation and leave liabilities.

2.1.4 Agencies should ensure that they have a detailed understanding of the financial implications of any changes to remuneration or other terms and conditions being considered. To that end, agencies should undertake a detailed cost assessment of a proposed enterprise agreement, or other workplace arrangement, to ensure affordability of remuneration increases and other improvements to terms and conditions over the life of the proposed agreement. Agencies should also seek to assess any potential increases in costs from the flexibility clause and from the implementation of any incomplete reviews of terms and conditions contained within the agreement, or reviews to be completed within the life of a new agreement.

No redirection of programme funding

2.1.5 Agencies are not to assign funding from agency programmes and initiatives to fund improvements in employee terms and conditions. Other offsets to fund improvements are not to result in reductions in output or services, or increases in charges.

Certification and assessment of affordability

2.1.6 A detailed affordability assessment will be conducted in relation to any proposed remuneration increases. This process is detailed at Part 3.

2.1.7 At the time of seeking final assessment and approval of the proposed agreement, agencies must provide the APSC with certification from the Agency Head of the affordability of the proposed agreement.

2.1.8 Notwithstanding this, any proposed agreement may be subject to enhanced scrutiny by the Department of Finance in relation to affordability, where the APSC considers that a referral to the Department of Finance would be appropriate.

2.2 If the total cost of a proposed agreement is not affordable within an agency's existing budget, the Ministers must not approve the agreement.

2.2.1 Where the Department of Finance and/or the APSC indicates that it considers an agency's proposed workplace arrangement is not affordable, the agency must revise the proposal to ensure it is affordable.

2.2.2 Where an agency's proposed workplace arrangement requires approval under this policy, and the Department of Finance and/or the APSC has indicated that it considers an agency's proposed workplace arrangement is not affordable, the relevant agency Minister and the Public Service Minister must not approve the proposed arrangement.